Poverty and the welfare state in America

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I'm not going to comment on the recent U.S. presidential election, as plenty of people have done that already. Instead, I'd like to shine some light on an issue that should concern the president and Congress as well: the issue of poverty and the welfare state in America.

Many Canadians (I would even say the vast majority) believe that the United States has almost no social safety net whatsoever. Yet, according to a 2012 report from the Cato Institute entitled The American Welfare State: How We Spend Nearly $1 Trillion a Year Fighting Poverty – and Fail, the U.S. actually spends an awful lot on a whole bunch of programs intended to help the poor. The real problem is that this spending doesn't seem to be very effective.

According to author Michael Tanner, this year alone "the federal government will spend more than $668 billion on at least 126 different programs to fight poverty." Add in state and local government spending, and the figure jumps to over $950 billion.

These numbers rose significantly under George W. Bush, and even more quickly under Barack Obama. Since he took office, "federal welfare spending has increased by 41%, more than $193 billion per year." Yet the poverty rate in America has now topped 15%, higher than it's been in nearly a decade and almost as high as it was when Lyndon Johnson declared a "war on poverty" almost 50 years ago.

Maybe government just needs to spend more, you say? To put it in perspective, $1 trillion amounts to over $20,000 a year for every poor person in the United States – more than $60,000 for every poor family of three. As Tanner points out, since the poverty line for a family of three is $18,530, you'd think that America would have licked this problem by now.

But it's not about how much money is spent, but rather how much is misspent, with 126 different programs administered by seven different cabinet agencies and six independent agencies.

Now it's true that the U.S. is in a recession, and many of these programs expand automatically in hard times. But it is also true, as Tanner writes, that part of the massive growth in spending "is due to conscious policy choices by this administration to ease eligibility rules and expand caseloads."

For example, a provision in the stimulus bill reversed many of the back-to-work incentives contained in the Personal Responsibility and Work Opportunity Reconciliation Act signed by President Bill Clinton in 1996.

Tanner concludes that it would be better to give people the tools they need to climb out of poverty, and he has some specific suggestions about how to do that.

Whatever your political orientation may be, the fact is the U.S. is spending a lot of money fighting poverty with very little to show for. American politicians, Obama first and foremost, need to take note of this fact, and change the game plan because the current one is going nowhere.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.
* This column appears in Sun Media newspapers, published both in several of Canada's key urban markets (Toronto, Ottawa, Calgary, Edmonton, Winnipeg and London) and in its 28 community dailies.